D2L (DTOL) investor relations material

Executive summary

• Subscription and support revenue rose 6% year-over-year to $49.4 million, with ARR up 6% to $213.4 million, driven by new customers and upsell expansion, but offset by higher churn in the U.S. K-12 segment and lower services revenue.

• SaaS revenue increased 10% year-to-date, and adjusted EBITDA rose 33% with a 15% margin, though quarterly adjusted EBITDA was $7.9 million (14.7% margin), down from $10.4 million last year.

• International and corporate markets delivered strong ARR growth, with international ARR up over 15% year-over-year.

• The company is investing in product innovation, notably AI-driven offerings, and expanding its go-to-market team for employee training.

• Net income for the quarter was $4.4 million, compared to $5.5 million in the prior year.

Financial highlights

• Total Q3 revenue was $54.1 million, flat year-over-year due to a prior-year services revenue true-up and a decline in professional services revenue.

• Subscription and support revenue increased 6% to $49.4 million; professional services revenue fell 38% to $4.7 million.

• Adjusted gross margin was 67.8%, down from 69.9% last year, impacted by database migration costs.

• Adjusted EBITDA was $7.9 million, down from $10.4 million last year; free cash flow for the quarter was $18.8 million, up 66.5% year-over-year.

• Cash and cash equivalents stood at $110.5 million with no debt at quarter end.

Outlook and guidance

• Full-year guidance: subscription and support revenue of $198–$199 million (10% growth), total revenue of $217–$218 million (6% growth), and adjusted EBITDA of $32–$33 million (15% margin).

• Pipeline entering Q4 is the healthiest in over three years, supporting confidence in near-term and medium-term growth targets.

• Management remains confident in achieving the fiscal 2028 operating model, targeting 18–20% adjusted EBITDA margin.

• Guidance reflects higher churn in U.S. K-12 and continued decline in professional services due to cautious U.S. Higher Education spending.